Charlie Platt, Managing Director, Banking, SAP Fioneer
Traditional retail banks face huge challenges this year. Diminishing customer loyalty, particularly among younger generations who perceive them as outdated, complex and untrustworthy, poses a significant hurdle. Furthermore, the increasing prioritisation of sustainable banking practices adds complexity to retaining customers. Challenger banks are seizing the opportunity presented by these shifts, offering simplified and more appealing financial alternatives. This strategy is eroding customer loyalty and posing a significant threat to the market share of traditional banks.
However, advancements in technology provide them with an opportunity to keep up. By embracing innovative solutions, they can enhance personalisation, increase productivity and nurture innovation. This empowers them to deliver superior value to customers and fend off competition from challenger banks.
As a result, 2024 holds the promise of becoming a transformative year for banking technology, influenced by five critical trends:
- Hyper-personalisation
Traditional banks are moving from standardised approaches to personalised banking experiences. Leveraging the power of big data and analytics, banks are creating bespoke customer experiences tailored to individual preferences and needs. By offering more personalised products and services, they can build deeper connections with customers, creating loyalty and retention in an increasingly competitive landscape. However, effectively achieving this goal hinges on understanding how customers perceive their banking interactions, including catering to the unique preferences and behaviours of younger demographics like Gen Z and Gen Alphas.
But, it’s important to note, as challenger banks set new standards with innovative and personalised experiences, hyper-personalisation is no longer just a strategy but a necessity for traditional players to remain relevant.
- Intelligent Automation
AI remains at the forefront of revolutionising the banking sector, advancing intelligent automation to streamline operations and boost efficiency. Through automation of repetitive tasks, AI-driven systems facilitate cost reduction, error minimisation and strategic resource allocation. This transition towards intelligent automation optimises back-office operations and enables employees to dedicate time to higher-value tasks like personalised customer service and strategic decision-making. Furthermore, as AI capabilities continue to evolve, its transformative influence on reshaping the banking landscape is set to expand, promising further innovation and efficiency gains across the industry.
- Cloud Migration
The momentum behind cloud migration in banking shows no signs of slowing down in 2024, as banks increasingly adopt a cloud-first strategy for their on-premise operating model. This transition involves moving towards a unified, open operating system that creates seamless integration between on-premises and cloud environments, simplifying the process of migrating applications. However, despite these advancements, it may take a significant amount of time for the majority of banks to fully adopt this cloud-first approach.
By embracing the cloud, banks gain the ability to scale their operations seamlessly, enhance agility and achieve cost efficiencies. Additionally, the robust computing resources provided by cloud infrastructure enable broader adoption of innovative technologies such as AI and machine learning. Through migration to the cloud, banks position themselves to future-proof their operations, remaining at the forefront of technological progress.
- Open Banking and API Integration
As open banking principles gain momentum, they serve as catalysts for collaboration and innovation within the banking ecosystem. By opening up their APIs, banks empower third-party developers to create inventive applications and services, thereby enriching the overall customer experience. This heightened interoperability not only stimulates innovation but also enables banks to provide more tailored and customer-centric solutions that cater to individual needs.
As the concept of open banking becomes more firmly established, we can anticipate a surge in new fintech solutions and partnerships aimed at providing even greater value to customers. This evolution promises to reshape the financial landscape, creating a more dynamic and customer-focused industry that embraces collaboration and innovation at its core.
- Sustainable Banking
In response to growing environmental and social concerns, sustainability takes centre stage in the banking sector in 2024. Banks are increasingly aware of their role in addressing climate change and are leveraging technology to align with sustainable practices. This includes adopting tools to assess and reduce their carbon footprint, offering sustainable financial products and integrating sustainability criteria into investment decisions to meet Environmental, Social, and Governance (ESG) regulations. As consumers become more environmentally conscious, sustainable banking practices will not only be a moral imperative but also a strategic differentiator for banks looking to build trust and loyalty with their customers. This transformative shift underlines the industry’s commitment to driving positive environmental and social impact while simultaneously enhancing customer satisfaction and loyalty.
